On April 8, 2023, Samsung Electronics (005930.KS) announced its preliminary earnings report, revealing an estimated operating profit of 6.6 trillion won (approximately $4.49 billion) for the first quarter. This figure significantly exceeds the 5.1 trillion won estimated by LSEG SmartEstimate and reflects a mere 0.2% decline compared to the same period last year, where Samsung recorded a profit of 6.61 trillion won.
Analysts have attributed this better-than-expected performance largely to robust sales of memory chips, particularly those used in consumer devices such as smartphones. The demand has been fueled by concerns among customers regarding potential U.S. tariffs on semiconductors, leading many to stockpile chips in anticipation of price increases. Greg Roh, head of research at Hyundai Motor Securities, noted that while general memory prices have declined, the proactive purchasing by customers significantly boosted Samsung's memory chip shipments.
In response to the promising results, Samsung's shares surged by 2.6% during morning trading, outperforming the benchmark KOSPI's 1.6% increase.
Despite the positive first-quarter results, analysts predict a downturn in smartphone shipments for the second quarter. Following recent announcements from U.S. President Donald Trump regarding reciprocal tariffs on trading partners, including China, there is heightened uncertainty in the market. Although semiconductors were initially exempted from these tariffs, Trump has indicated plans to impose tariffs on chips in the near future, which could further complicate Samsung's supply chain.
Kim Sun-woo, a senior analyst at Meritz Securities, suggested that Samsung's operating profit for the second quarter could stagnate due to delays in securing new customers for high-bandwidth memory (HBM) chips. Analysts anticipate that profits from Samsung's chip division may have halved to about 800 billion won in the first quarter compared to the previous year, primarily due to losses in the foundry business.
In January, Samsung introduced its latest Galaxy S25 smartphones, which feature enhanced AI capabilities aimed at revitalizing sales and competing with rivals like Apple (AAPL.O) and Chinese manufacturers. The surge in shipments in the first quarter was partially driven by North American customers who preemptively ordered devices before the potential imposition of tariffs.
Looking ahead, analysts are cautious about the second quarter, predicting a decline in shipments as buyers have already stocked up. Samsung's chairman, Jay Y. Lee, has acknowledged challenges faced by the company, particularly in light of sluggish sales in its AI chip segment due to U.S. export restrictions to China, its largest market. However, Samsung executives remain optimistic, expecting a recovery in chip earnings in the second half of the year, driven by demand from smartphones and data centers.
Additionally, Samsung aims to supply its advanced HBM3E 12-high chips to Nvidia by mid-year, which could further bolster its position in the competitive memory chip market.
South Korea's SK Hynix (000660.KS), the world's second-largest memory chipmaker, has also reported that some customers are accelerating orders in anticipation of the upcoming U.S. tariffs. However, they remain cautious about relying on sustained demand recovery. In contrast, Micron Technology (MU.O) recently forecasted third-quarter revenue that exceeds Wall Street expectations, signaling strong demand for its HBM chips used in AI applications.
As the market evolves, Samsung's ability to navigate these challenges will be crucial in maintaining its leading position in the semiconductor industry. The company is set to release detailed financial results on April 30, which will provide further insights into its performance and strategies moving forward.
